While commending the Bachar Committee reforms for what they did to increase competition on the commercial side of banking, Bank of Israel Governor Stanley Fischer is calling for more changes to provide similar relief for consumers. "They [the reforms] did a lot to increase competition by essentially moving the insurance companies and some of the funds away from the control of the banks so they put more of the assets that are available to be lent into the hands of non-banks and those people have started to participate in lending," Fischer said in an interview with The Jerusalem Post. "[But] on the side of the consumer and the private individuals who are customers of banks, it didn't make a big change. So one important mission that remains is to increase competition for consumers - for the little guy, for the people who make deposits in banks." Indeed, on Thursday, Fischer told Israeli bankers that the entry of a foreign bank into the domestic market would be a "good" thing and that he hoped it would happen. His comments come amid a consumer uproar after three of the country's major banks - Bank Hapoalim, Bank Leumi and Israel Discount Bank - recently announced increased fees for many of their banking transactions. "I was asked by some friends how I was getting on in Israel and whether I understand the way things work here," the central bank governor said at Thursday's annual meeting of the Banking Association. "I replied that the most difficult thing for me to understand was my pay slip. The truth is, the one thing I find more difficult to understand is the statement I get from the bank." "For foreigners, [the fees] are strange. Some of them are strange," Fischer said in his Post interview. "Those things need to change and the best way to change them is to increase competition." On a more general level, Fischer claimed there had been much progress in reforming the capital markets, including a move to where there soon will be securitizations of mortgages, which will increase the capacity of banks to lend because when a loan is securitized it is taken off the bank's balance sheet. He also noted advances in the stock markets where progress is being made on transparency and on the quality of regulation, as well as to how trades are accomplished on the Tel Aviv Stock Exchange. Meanwhile, Fischer, who on Thursday boosted his 2006 economic forecast to 4.8 percent growth from 4.6%, said that on strictly economic grounds, the short-term situation was relatively good especially given the summer's war in Lebanon. "Every sign we've seen since the war is that the economy is recovering very rapidly," he said. But on a longer term basis, Fischer said the country must address the issues of poverty and debt over the next five years, and pay more attention to education. "What worries me about the longer term is the question of can we maintain our competitive edge, which relies very much on innovation and maintaining a very high standard educational system," he commented, noting that there was substantial evidence that standards have been dropping, which will have a negative impact on long-term growth capacity. "There are dismaying data that come out about the educational achievements of the Israeli pupils and those things are very worrisome - because if we don't maintain our competitive edge in human capital we don't have very much. We're not rich in natural resources." He called the recently appointed committee on university education critically important. "What is critically important is not whether they write a good report... but what happens after that. We've had may good reports in Israeli history in many different areas that don't get implemented and that's where the issue will be," he said. The country, because it is small, he added, is susceptible to brain drain. He blamed low salaries for the failure to bring many outstanding Israelis back to the country after they complete degrees abroad. "A graduate of an American university goes into an assistant professor job at about five-times what he would earn here and that makes a difference," he said. Looking back at his 18 months in office to date, Fischer said what surprised him most on the positive side was the robustness of the country's economy. "The rate of shocks per month is very high in Israel," he said, noting the resignation of former finance minister Binyamin Netanyahu, the illness of former prime minister Ariel Sharon, the elections of Hamas, the country's own elections and the second war in Lebanon during his time in the job. "And here we are a year later with the stock market at all-time peaks, the currency very stable, the inflation rate low and growing... That's extraordinary and that's much better than I expected." On the negative side, Fischer said he was surprised at how difficult it's been to settle the labor dispute at the central bank, which resulted in a work stoppage this week. "It's taken far too long," he said. "I had hoped that very rapidly we could settle the labor dispute and introduce a new Bank of Israel law and reorganize the bank. That's taken longer than it should have and longer than it needed to." One of the extraordinarily impressive things he cited during the war was that foreign investment in terms of purchasing Israeli companies actually continued, which was a vote of confidence in the underlying management of the economy and very important for Israelis. Yet more important than foreign investment, Fischer claimed, was the need for Israeli investment in Israel. "Whenever I say investors, people always think I'm talking about Warren Buffett. We're not talking about Warren Buffett, we're talking about what Israelis want to do with their money. The foreign investors are very important, but the bulk of investing in any country is done by domestic residents and Israelis have a free choice - they can invest here and they can send their money anywhere in the world. We've got to make it attractive for them here as opposed to putting their money in the US stock market or some emerging market stock market." Israelis, he added, also must start thinking about physical investments - buying buildings and machinery - which he said is still relatively low in Israel at about 20 percent of GDP. "It would be very good if Israeli businessmen and households would get to a position where they thought it made sense to invest in housing, more offices and more business." Investment, however, is tied to interest rates and the International Monetary Fund, in its report on Israel released earlier this month, recommended that the country work to lower its high debt level because it could otherwise face a slowing of investment. "It's critical that with our high debt-to-GDP ratio (about 92%), that we keep on reducing it fast because it's higher than it was in 2000 when we had our last peak. So although we've had growth since 2003 for over three years now, we still haven't gotten back to where we started before the peak (90% in 2000)," Fischer said. "When the debt ratio is low and you go into recession you can cut taxes, you can raise government spending, you can temporarily allow the debt ratio to increase. But when ours is so big - spending 15% of budget on interest - we will be in a situation that if there's a recession soon, which we don't expect but you never know... we'll get into a recession and fiscal policy will be immobilized."